Delaware legislators introduced a bipartisan bill to reinstate the employer match for state employee contributions to the deferred compensation program, known as DEFER.
The state suspended the match in July 2008 during the early part of the Great Recession when budgets were tight. Previously, the employer match for contributions to DEFER plans — which comprise 457, 401(a) and 403(b) plans totaling $1.3 billion as of Dec. 31 — was a maximum of $10 per pay period.
Sponsored by Democrats state Sen. Trey Paradee and House Majority Leader Valerie Longhurst, the bill was introduced April 19 and would set the new maximum at $20 per pay period. There are 26 pay periods in a year, a spokesman for state Treasurer Colleen C. Davis, who proposed the bill, confirmed in an email.
“It was always the intent of the General Assembly to revive the match after lawmakers reluctantly put it on hold in order to cut costs,” Ms. Davis said in a news release. “In fact, every budget bill since fiscal year 2008 contained language reading ‘It is the intent of the General Assembly that this program be reinstated when funding becomes available.’”
When the state offered the employer match, the employee participation rate was growing at an average of 3.25% per year, but after it was suspended, employee participation declined at an average rate of 1.6% per year, according to the news release.
“For over a decade, the State of Delaware provided a meager match to the deferred compensation program as a way to encourage state workers to save for their future,” Mr. Paradee said in a statement. “Now, after six straight years of surpluses, I think it’s time we finally keep our promise and restore a match that keeps pace with inflation. This legislation is not only good for state workers, it also will help the State of Delaware at a time when it’s getting harder to compete with the private sector.”
The bill also authorizes the state to contribute to an employee’s retirement account if the employee is making payments on student loans, and as a result, the employee cannot afford to contribute to their retirement account. The measure was made possible by a provision in SECURE 2.0, a comprehensive retirement security bill Congress passed in December.